Learn How To Manage Your Finances
According to CNN money, roughly 76% of Americans currently live paycheck to paycheck.
Now I don’t know about you but that to me is very concerning especially since I used to be part of that 76%. I would get paid on Friday and would be broke by Monday because of all the bills and debt I had to pay off. It was horrible and honestly I felt like a slave. Trust me when I tell you, this is not how you want to be living especially if you have a family to support.
When I decided to put down my pride and seek out help, I met with a financial advisor who explained to me everything I was doing wrong.
Here are some of the common mistakes as to why you may end up falling into this 76 percentile.
- There is no budget
- Expenses exceed your income
- Credit cards are maxed out or have high balances
- No savings account/emergency funds
If 76% of Americans live paycheck to paycheck for these reasons, then for starters, do the complete exact opposite of what they do in order to become part of the succeeding 24%.
This is what he showed me how to do:
- Create a budget– A budget outlines how much of your hard earned money is coming in and how much money is going out. For the most part budgets will include your income (paycheck) and your bills. The reasons why budgets are important are because they allow you to see exactly where your money is going and how much you have left over after all your bills are paid. Having this budget as a guide, it will help you have better control over your money as it allows you to adjust how much you spend accordingly.
- Live within Your Means– If your expenses (bills) are greater than your monthly net income (what you make after taxes are taken out) then you are going to see a negative bank account. So as an example, if your monthly bills are $2,000 and you only make $1,500 every month then you will have a negative bank account of -$500. To avoid this, separate your bills in two categories- needs vs. wants –in order to identify which bills you can cut “out”.
- Minimize Credit Card Usage– Stay away from retail credit cards because they allow you to spend money that you don’t have and then charge you a high interest rate for not having it. Credit cards are best used for emergencies but misusing them to spend on clothes, electronics, jewelry, Walmart or Target purchases, is a huge mistake. Don’t use more than 30% of your credit card limit within a month’s time frame to avoid running into debt you can’t manage. If you must leave them at home when you go out to the malls then do so.
- Create a Savings/Emergency Account– Let’s face it, emergencies happen. Whether your car breaks down, someone out of the state gets ill, or God forbid you get laid off. It is better to have money available for emergencies than to fall into more debt for not being prepared. Thinking proactively will help you stay ahead and by creating a savings/emergency account for unexpected situations you will be able to keep a positive bank account in the long run. Set a goal (typically 3-6 months of your monthly expenses) and separate a percentage of your income every week to deposit into a savings account.
Starting with these 4 simple steps put a lot into perspective for me. First of all, it showed me how little of financial education we receive in the 15+ years we are in school. Secondly it showed me that money makes a good slave but a horrible master.
Having a shortage of money can be really stressful and overwhelming. This is why I recommend seeking professional help, reaching out to us for advice so we can post articles on ways to help or focusing on increasing your income and decreasing your expenses.